Tencent Joins $278.5M Funding Round for Chinese High-Powered AI Chip Developer Enflame

Chinese tech giant Tencent has helped fund a $278.5 million funding round in Shanghai-based artificial intelligence chip developer Enflame Technology. Tencent has been part of every Enflame funding round since the startup was founded in 2018, including leading the $48 million pre-series A round. The continual cash infusion is part of China’s escalating research and investment into AI and chipset creation as competition with tech firms outside of the country heats up.

Enflame On

Tencent’s mobile games and WeChat messaging app make the company a household word, but it has been growing an enterprise cloud service as well. Enflame Technology designs and manufactures chips used to create and train AI systems. The startup’s proprietary technology is specifically for absorbing and processing extremely large data flows as a tool for training AI that can then be installed in data centers and related enterprise centers. The newest funding round was led by CITIC Private Equity Funds Management and Primavera Capital, with Tencent joining other previous investors Redpoint Ventures China and SummitView Capital. The new round more than doubles Enflame’s previous funding, for approximately $462.2 million in all.

Artificial intelligence is at the heart of the digital economy infrastructure of the future and a battleground for hard technology

That nearly half a billion dollars of investment was reportedly encouraged by the Chinese government as a way of making China independent from the U.S. as a hub of both artificial intelligence and semiconductor manufacturing in the wake of economic sanctions volleyed between the two countries over the last few years, including blacklisting China’s largest semiconductor company, SMIC. The jockeying for position has left the Chinese telecommunications manufacturing industry without access to the dominant U.S. semiconductor market. The resulting ripples are creating unease at Taiwan’s prestigious semiconductor manufacturer TSMC and creating opportunities and pitfalls for tech firms globally, from Israel to Russia. Tencent got caught up directly in the conflict after the U.S. raised the specter of national security concerns over its investment in TikTok parent company ByteDance, briefly seeming to spell doom for the social media app and landing a major financial hit on its investors. The chips Enflame builds, and the services they support are crucial to China’s plans for technological self-reliance, opening plenty of investor wallets.

“Artificial intelligence is at the heart of the digital economy infrastructure of the future and a battleground for hard technology,” Enflame founder and CEO Zhao Lidong said in a statement translated from Chinese. “As a technology-driven company, we have planned and are fully implementing the product technology roadmap for the next three years, with joint development of hardware and software systems as the core for product iterations to establish the competitive advantage of Enflametechnology in the market. At the same time, we will also increase the exploration of cutting-edge technologies in the field of artificial intelligence so that future innovation enables greater commercial value.”

Chinese Competition

Along with Baidu, Alibaba, and Xiaomi, Tencent is one of the vast tech giants with an overwhelming presence in China. Though sometimes lumped together with the others and called BATX, Tencent is sometimes left out of lists discussing successful Chinese AI and voice assistants. Baidu’s DuerOS, Xiaomi’s Xiaodu, and Alibaba’s Tmall Genie all take up most of the focus on the subject. Tencent clearly sees the value of making AI chips and isn’t willing to concede it to rival developers.

That’s also likely part of why Tencent, along with Baidu, was a founding member of the Voice Interoperability Initiative, which pushes developers to make voice-capable able to connect to each other. The larger smart speaker manufacturers weren’t a part of the initiative initially,  and Alibaba still isn’t, but Xiaomi joined up about a year after the launch. Tencent is lagging behind some of its rivals in chip manufacturing too. Baidu’s Kunlun 1 AI chip arrived on the market last year, following the 2019 debut of Alibaba’s own chip designed for similar purposes. Tencent may be hoping to change the status quo by leveraging Enflame’s technology to boost the power of its AI assistant and draw more customers for the related smart speaker.

American Shift

Outside of China, Nvidia and Qualcomm have dominated the AI chip sector for enterprise and consumer services, but that may be changing, particularly with voice assistants. Google and Samsung are rumored to be developing a processor, possibly called Whitechapel, for Pixel smartphones and Chromebook computers. Whitechapel would replace the Qualcomm-built chips Google uses right now and make it easier for Google to improve Google Assistant’s functioning. Amazon has moved most of its Alexa operations onto the Inferentia computer chip produced in-house and away from the Nvidia chips used by Alexa until now. Amazon claims it will increase speed and reduce Alexa’s energy demands, handling Alexa’s machine learning tasks better, including recognizing language and images, and generating an appropriate response. And Graphcore, used by Microsoft Azure Ai, recently nabbed $222 million in a funding round of its own.


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